LAW NOTES  

INCREASE TO THE ILLINOIS SMALL ESTATE LIMIT: WHAT IT MEANS FOR ESTATE ADMINISTRATION

Illinois law requires that the estates of deceased persons valued in excess of the small estate threshold go through a formal court administration process called probate. Estates under the threshold may be administered with a small estate affidavit and need not be overseen by a court.

A small estate affidavit is a sworn statement that allows heirs (family members who inherit a person’s property) to collect a decedent’s personal property without opening a probate case in court. Banks and other institutions may rely on the affidavit. The person signing the affidavit, who is also known as the personal representative, promises to pay valid debts and distribute the remaining assets to heirs. 

On August 15, 2025, the Illinois small estate affidavit limit was raised from $100,000 to $150,000. This means that families may be able to avoid probating their loved one’s estate if the estate value is under the new limit of $150,000. These changes can potentially save families time, expense, and stress when a loved one passes away. Importantly, the amendment applies to the estates of decedents whose date of death is on or after the effective date of August 15, 2025.

In addition to raising the small estate affidavit limit to $150,000, the value of motor vehicles registered with the Illinois Secretary of State are now excluded from being counted towards that limit. This means that an estate not exceeding $150,000 worth of personal property can potentially utilize a small estate affidavit to avoid probate, provided that the estate is limited to tangible and intangible personal property and motor vehicles registered with the Illinois Secretary of State.

A small estate affidavit may be a good fit when the individual did not own real estate in their name alone, the estate consists of personal property only (i.e., cash, accounts, household items, vehicles), and there are no disputes as to the payment of debts and the division of assets among heirs or named beneficiaries. One instance in which small estate affidavits are commonly used includes the first spouse’s death because most assets are titled jointly, thereby passing to the surviving spouse, and the value of assets in the sole name of the deceased spouse often fall under the probate threshold.

In certain circumstances, opening a probate may still be necessary or advisable, e.g. when a decedent owned real estate in their name alone (such as a house or land); the estate includes assets valued at more than $150,000; there is a dispute about a decedent’s Last Will and Testament, heirs, or division of assets; complex creditor issues; or ongoing court authority is needed for management of the estate.

           Illinois law requires a small estate affidavit to include a list of all outstanding debts of the decedent’s estate. By signing the affidavit, the personal representative agrees to pay valid claims in the order required by state law and distribute remaining property to heirs. The personal representative must also agree to indemnify creditors, heirs, and institutions that rely on the affidavit. Financial institutions that act in good-faith reliance are protected by statute.

With the higher limit and new vehicle rules, Illinois families may be able to settle simple estates without probate, potentially saving time and expense. If you’re handling a recent loss, this change may create a simpler path. Questions about whether the small estate affidavit administration procedure is appropriate for one’s particular situation should be discussed with an attorney.

BIG BEAUTIFUL BILL TAX UPDATES

           On July 4, 2025, the Big Beautiful Bill became law, enacting numerous tax changes that families, business owners, and farmers should be aware of. Many changes apply to 2025 tax returns, several run through 2029, and a few are now permanent. Below are highlights of some of the major changes to federal tax laws.

· Pass-through qualified business income (QBI) deduction is now permanent. Owners of S-corps, partnerships, and sole proprietorships keep the 20% deduction under §199A going forward. There is now a minimum deduction available for activities generating $1,000 or more of QBI and the phase-outs have been expanded.

· SALT cap temporarily higher. The cap on itemized state & local tax SALT deductions increases from $10,000 to $40,000 in 2025, indexing with inflation through 2029. In 2030, the deduction will revert to $10,000. Deduction phase outs based on modified adjusted gross income apply.

· 100% bonus depreciation returns. Businesses can expense 100% bonus depreciation for qualified property placed into service after January 19, 2025.

· Section 179 expensing limit increased. The expensing limit under Section 179 has been raised to $2.5 million, with the expensing phase out threshold raising to $4 million for 2025, with each amount adjusted annually for inflation.

· Federal estate & gift exemption increase. The unified estate and gift exemption steps up to $15 million per person and $30 million married starting in 2026, indexed for inflation thereafter. The Illinois estate tax threshold remains $4 million.

· Expanded 529 plans. Eligible education expenses for 529 savings plans are expanded to include trade certifications, credentialing programs, and an expanded list of expenses for K-12. The distribution limit for K-12 expenses has been increased from $10,000 to $20,000.

· Overtime deduction. Effective for 2025 through 2028, workers who receive “qualified overtime” pay required by the Fair Labor Standards Act may deduct up to $12,500 (single) or $25,000 (married filing jointly) of reported overtime, regardless of whether they itemize on their returns. The deduction phases out above $150,000 (single) or $300,000 (married filing jointly) modified adjusted gross income. You must include your Social Security number and file jointly if married to claim it. Employers or payors must report qualified overtime to the Internal Revenue Service (IRS) or Social Security Administration (SSA) and give workers year-end statements.

· Car loan interest deduction. Effective for 2025 through 2028, eligible taxpayers can deduct up to $10,000 of interest on a secured loan used to buy a new, personal-use car, minivan, van, SUV, pickup truck, or motorcycle, with a gross vehicle weight under 14,000 pounds, that has undergone final assembly in the United States. To qualify for this deduction, the loan must begin after December 31, 2024 and the vehicle may only be for personal use, not for business or commercial use. Leases and used vehicle loans do not qualify for the deduction. Refinanced loans generally remain eligible. The deduction phases out above $100,000 (single) or $200,000 (married filing jointly) modified adjusted gross income. You must list the vehicle’s vehicle identification number (VIN) on your return to receive the deduction. Lenders must report interest to the Internal Revenue Service (IRS) and give taxpayers a statement.

· New deduction for seniors. For tax years 2025 through 2028, individuals who are age 65 and older get an additional $6,000 deduction each ($12,000 total for a married couple where both spouses qualify), in addition to the current standard deduction for seniors, phasing out over $75,000 (single) or $150,000 (married filing jointly) modified adjusted gross income. To qualify, taxpayers must attain age 65 on or before the last day of the taxable year, list their Social Security number, and file jointly if married.

· Increase in standard deduction. The standard deduction has increased to the following amounts: $31,500 (previously $30,000) for married filing jointly or a qualifying surviving spouse; $23,625 (previously $22,500) for head of household; and $15,750 (previously $15,000) for single or married filing separately.

· Child Tax Credit (CTC). Starting in 2025, the CTC increases to $2,200 (previously $2,000) per child with inflation indexing. Deduction phase outs based on modified adjusted gross income apply.

           These changes could affect you. This is not a comprehensive review of all tax changes nor does this article provide individualized advice. We encourage you to consult your attorney or accountant regarding taxation matters. Should you have questions or concerns as to if or how these tax updates may affect your business, organization, or estate planning, please reach out to an attorney. 

IRS Circular 230 requires that certain types of written advice include a disclaimer. To the extent the preceding message contains written advice relating to a federal tax issue, the written advice is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer, for the purposes of avoiding federal tax penalties, and was not written to support the promotion or marketing of the transaction or matters discussed herein.

DON’T LET AN OUTDATED BENEFICIARY DESIGNATION UNDUE YOUR ESTATE PLAN

When you open a 401(k) retirement account, Individual Retirement Account (IRA), life insurance policy, annuity, Health Savings Account (HAS), 529 plan investment account, or a bank/brokerage account, you have an opportunity to designate who receives those funds when you pass away. Those person(s) are referred to as beneficiaries. The beneficiary designation that is on file with the company usually controls who receives payment in the event of your death, even if your will or trust says something different.

Beneficiary forms are often completed and sit out of sight and mind until they matter most. Beneficiary designations can undermine your estate plan and lead to unintended results. A quick review now can help avoid a potential dispute later. If the form is blank, outdated, or unclear, the company may pay the benefits to your estate, delay payment, or follow default rules of distribution that you did not intend.

Beneficiary designations should be updated at various times throughout our lives, especially when major life events occur. You should review beneficiary designations after major events such as marriage or divorce; the birth or adoption of a child or grandchild; a death in the family; a move to a new state; starting a job that provides retirement accounts; buying or replacing life insurance; opening new accounts; or establishing or updating a trust. If your life changes, your forms may need to reflect those changes. Clients are encouraged to review their beneficiary designations periodically, annually if possible.

A recent Illinois appellate case highlights the importance of making sure beneficiary designations are up to date, especially after a divorce occurs. In the case, the account owner divorced but never changed his retirement plan beneficiary designations, leaving his ex-spouse as his primary beneficiary and his son as his secondary, or contingent, beneficiary. After he passed away, the appellate court decided that the beneficiary designation still ruled, and the ex-spouse received the funds. The lesson is simple: divorce does not update your beneficiary forms for you for certain types of accounts. You must sign and file new designations.

The most common missteps with beneficiary designations are when people forget to name contingent beneficiaries, leave an ex-spouse on the form, do not update the form when a named beneficiary passes away, or assume a divorce decree automatically cancels prior designations. People may change jobs, roll over a retirement account, or replace an insurance policy and don’t realize the new account needs a new beneficiary designation form. Small errors, such as the use of a maiden name rather than a married name, can cause complications that prolong distribution.

The consequences of some beneficiary choices can also cause more complex problems. Naming a minor can trigger a court guardianship unless you establish a trust or, for smaller amounts, a Uniform Transfer to Minors Act (UTMA) account. Naming someone on Supplemental Security Income (SSI) or Medicaid can put a beneficiary’s benefits at risk unless a special needs trust is utilized. Because each situation is unique and requires its own analysis, please consult an attorney to make sure your designations work as intended.

           It is important to keep your beneficiary designations current. You worked hard to earn your assets. Make sure those assets go where you intend by ensuring your beneficiary designations are up to date. You may also help your family avoid distribution delays, fees, and unwelcome surprises after your death. This article is not exhaustive as each person’s circumstances are different and beneficiary rules vary. The right beneficiary arrangement may differ for you. If you have questions or would like assistance confirming your beneficiary designations match your wishes, please contact our office.

DOG BITES HAPPEN: WHO’S ON THE LEASH FOR LIABILITY?

Even if you’re not holding the leash, you can still be sued for a dog bite in Illinois. A recent appellate case makes this clear for people who own a dog together. If your co-owner is with the dog and a bite happens, you could still be on the hook for the bite.

In the case, a husband and wife co-owned a dog. The husband took the dog to a public park and let a two-year-old child pet the dog. The dog bit the child’s face. The child’s mother sued both the husband and wife, as co-owners. The trial court threw out the claim against the wife because she wasn’t there when it happened. However, the appellate court reversed and sent the case back to the trial court, holding that a co-owner who is not present at the time of the bite can still be a party to the lawsuit.

Under Illinois law, an owner is liable for a dog bite when a dog, without provocation, injures a person who is peaceably behaving in a place they may lawfully be. An “owner” includes anyone with a property right in the animal and others who keep or control it. The key point from this case is that being a co-owner can be enough for a claim to proceed, meaning you don’t have to be holding the leash at the moment of the bite to find yourself in court.

If you co-own a dog, perhaps with a spouse, partner, or roommate, you may share liability for a bite, even if you are not present when the bite occurs. Dog owners should check their homeowner’s or renter’s insurance policies for dog-bite coverage and exclusions. Sharing a dog means sharing the risk. Plan ahead, practice safe handling, and confirm your insurance covers dog bites.

OFFICE NEWS

           In May, Attorneys Weller and Endress had the opportunity to present a seminar on considerations for business and non-profit succession planning to Greater Freeport Partnership members.

              In June, Attorney Endress presented at the Citizens State Bank agricultural outlook meeting, where she shared about wills, trusts and general estate planning considerations for farming families. 

              Attorney Bridget Trainor has joined the Freeport Public Library Foundation. She is excited to serve in this new role.

             If you would like us to conduct a seminar regarding a legal practice area, please contact us at (815) 233-1022.

            Please visit our website for past Newsletters and additional information about our firm at

https://www.etwlawyers.com/.